Senate GOP: Eliminate state income tax on retirees' Social Security

Minnesota Senate Republicans unveiled a plan to eliminate the state income tax on Social Security in order to keep retirees from leaving the state.

The “Retire in Minnesota Act” would reduce Minnesota’s income tax on Social Security income by 10 percent annually until it is completely phased out in a decade. Although leaders acknowledge it will reduce seniors’ contributions to state’s coffers—by $127 million in the next two years alone—that loss will be made up by the seniors who stay in the state and contribute to the economy.

“When they (stay), they spend money on movies, restaurants, theaters, they take the grandchildren with them, they give to local charities and pay property taxes,” said the bill’s co-author, Sen. Mary Kiffmeyer, R-Big Lake. “There’s a lot of revenue, that if you don’t do this, you’re going to hear the great big giant sucking sound of the southern states pulling our boomer retirees.”

Minnesota is one of seven states that offer no Social Security tax breaks for retires. Senate Republicans say 70 percent of seniors would benefit from their proposal, saving $600 per person per year. They have not discussed the proposal with Senate Majority Leader Tom Bakk, DFL-Cook, or Taxes Committee Chair Sen. Rod Skoe, DFL-Clearbrook

Although they had no immediate estimates on state revenue lost by seniors who leave the state, the bill’s chief author, Sen. Dave Senjem, R-Rochester, said they were confident that those who would stay because of the tax break would pay for the cost to state coffers—and it won’t be cheap. The proposal is projected to cost $398 in 2017, $437 million in 2018 and $477 million in 2019.

“Anecdotally, it’s real,” said Sen. Dave Senjem, R-Rochester. “You don’t have to go to too many coffee shops to know that ‘So-and So is leaving.’ We hear it virtually every day. It’s real and I don’t think we can ignore it anymore.

Although he acknowledged that many retired Minnesotans leave for warmer climates, Senate Minority Leader David Hann, R-Eden Prairie, said so many others simply jump the border to Iowa or Wisconsin.

“You’ve got people who live in Rochester or Winona, all they have to do is move across the river, and they don’t pay tax on their Social Security, and they get to stay close to their family,” he said. “There are some states where they can just move a few miles and be in a place where they have much better financial security.”

Photo: Left to right: Minnesota GOP Senators David Hann, Mary Kiffmeyer, Dave Senjem, Carla Nelson, Gary Dahms and Will Phillips, state director of the AARP in Minnesota.

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